===============================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
MESSAGE FROM THE PRESIDENT........................... 2
FUND REPORTS
FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND............ 4
FRANKLIN RISING DIVIDENDS FUND........................ 8
FRANKLIN INVESTMENT GRADE INCOME FUND................. 12
STATEMENT OF INVESTMENTS.............................. 15
FINANCIAL STATEMENTS.................................. 22
NOTES TO FINANCIAL STATEMENTS......................... 25
</TABLE>
<PAGE>
MESSAGE FROM THE PRESIDENT
===============================================================================
May 15, 1995
Dear Shareholder:
It's a pleasure to bring you the ninth semi-annual report of the Franklin
Managed Trust for the period ended March 31, 1995.
Overall, 1994 reminded us that volatility is a fundamental market condition. Not
only did we see an unprecedented six interest rate increases, we also witnessed
the largest municipal bankruptcy filing in history by Orange County, California.
The first three months of 1995, however, brought welcome news. After raising
interest rates 75 basis points (three-quarters of a percentage point) in
November 1994, the Federal Reserve Board raised rates once more at their
February meeting. Although these actions could have caused a return to 1994's
volatility, markets rallied as investors perceived that additional interest rate
hikes may be unnecessary. Furthermore, the economic news that followed this
latest hike has been fairly positive to date economic growth has slowed,
inflation has remained subdued and securities markets have reacted favorably.
EQUITY MARKETS
After spending most of the summer in a moderate slump, stock markets experienced
a small December rally, as expectations for strong consumer spending grew. By
the end of 1994, the overall market had recovered to roughly where it began the
year, and the first three months of 1995 brought even more good news. On a total
return basis, both the S&P 500(R) and the Dow Jones Industrial Average(R) were
up over 9% for the first quarter of 1995.*
*Total return of both indexes includes reinvested dividends.
Total return of the Dow Jones Industrial Average is calculated by Wilshire
Associates, Inc. One cannot invest directly in an index.
2
<PAGE>
===============================================================================
BOND MARKETS
Nineteen ninety-four was one of the most difficult years in decades for
fixed-income investments. Like the equity market, however, the early months of
1995 brought strength to the fixed-income sector. Yields declined as long-term
bond prices rose in response to steps taken by the Federal Reserve Board to
quell inflationary pressures.
No one knows for sure what we can look forward to for the rest of the year;
interest rates may rise, fall or remain stable, or inflation may remain subdued.
Political changes here or abroad could significantly affect the financial
markets at any time. What we do know is that the markets will experience
volatility, which is a normal part of investing. However, by concentrating on
your long-term investment goals, you may be able to endure short-term
fluctuations with less concern.
The following pages contain specific information about each fund's performance,
including the effects of market conditions and management strategies on the
funds. While each fund has a distinct investment objective, the fundamental
principles remain the same: careful selection and constant professional
supervision.
We appreciate your continued support, welcome your comments and look forward to
serving your investment needs in the years to come.
Sincerely,
William J. Lippman
President
Franklin Managed Trust
3
<PAGE>
FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
===============================================================================
The Franklin Corporate Qualified Dividend Fund is designed to serve as an
income-producing vehicle for the cash reserves of taxable corporations. The fund
seeks to generate high after-tax income for corporations by investing primarily
in the equity securities of domestic corporations whose dividends qualify for
the 70% corporate dividends-received deduction.
The Federal Reserve Board continued its bid to curb economic growth and future
inflationary pressures by raising short-term interest rates on two occasions
during the six months ended March 31, 1995. The federal funds rate jumped 125
basis points to 6.00%, or double the 3% yield level that prevailed prior to
early 1994. We continued our policy begun prior to 1994 of emphasizing stability
of net asset value (NAV) while pursuing yield somewhat less aggressively.
Because a large portion of the fund's assets was invested in variable rate
preferred stocks with frequent dividend resets, the fund's NAV remained
relatively stable while the income available for distribution increased
significantly. This was substantiated by the fund's two dividend increases
during the reporting period.
- -------------------------------------------------------------------------------
FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
Portfolio Breakdown
As a percentage of total net assets
<TABLE>
<CAPTION>
SECTOR 9/30/94 3/31/95
- -------------------------------------------------------------------------------
<S> <C> <C>
Auction Rate
Preferred Stocks 31.6% 31.2%
- -------------------------------------------------------------------------------
Fixed-Rate
Preferred Stocks 24.3% 29.8%
- -------------------------------------------------------------------------------
Adjustable Rate
Preferred Stocks 18.5% 18.7%
- -------------------------------------------------------------------------------
Cash & Equivalents 25.6% 20.3%
- -------------------------------------------------------------------------------
</TABLE>
The table above indicates that the portfolio breakdown remained relatively
stable through the six-month period. Fixed-rate preferred stocks, which have
limited terms (ranging from a few months to a few years) until redemption, have
a price sensitivity to interest rates approximating that of short- to
intermediate-term bonds. Adjustable-rate preferred stocks are less sensitive to
interest rates as they reset their dividends
4
<PAGE>
===============================================================================
quarterly (according to the yield spread fixed at the time of their offerings)
relative to the highest of three U.S. Treasury benchmarks: the 3-month Treasury
bill rate, the 10-year Constant Maturity Rate, and the 20-year Constant Maturity
Rate. Auction-rate preferred stocks and cash equivalents exhibit the lowest
price sensitivity. Auction-rate preferred stocks normally reset their rates
every 49 days pursuant to a Dutch auction. Dutch auction preferreds are
typically priced at par plus a factor equivalent to the amount of dividends
"earned" since the last distribution. Investors have the right to redeem their
securities at par on each auction date.
We seek to control various sources of potential risk, including interest rate
risk and credit risk, through careful selection of securities and active
management of the fund. National ratings services such as Standard & Poor's,
Moody's, and our own in-house ratings systems, provide your fund's analysts with
an evaluation of each security issuer's credit quality. As indicated in the
chart on page 6, over 33% of your fund's assets were given a AAA rating the
highest rating available from Standard & Poor's. These ratings, while
- -------------------------------------------------------------------------------
FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
Top 10 Stock Holdings on March 31, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
COMPANY % OF TOTAL
INDUSTRY NET ASSETS
- -------------------------------------------------------------------------------
<S> <C>
Louisiana Power & Light 5.31%
Utilities
- -------------------------------------------------------------------------------
Transamerica 5.12%
Financial
- -------------------------------------------------------------------------------
Rhone-Poulenc Rorer 5.10%
Pharmaceutical
- -------------------------------------------------------------------------------
Bankers Trust 4.78%
Commercial Banking
- -------------------------------------------------------------------------------
Ford Holdings, Inc. 4.71%
Financial
- -------------------------------------------------------------------------------
G.E. Capital Corp. 4.44%
Financial
- -------------------------------------------------------------------------------
Alcoa 4.44%
Industrial
- -------------------------------------------------------------------------------
SunAmerica Corp. 4.11%
Insurance
- -------------------------------------------------------------------------------
USX Corp. 3.76%
Industrial
- -------------------------------------------------------------------------------
Rochester Gas & Electric 3.53%
Utilities
- -------------------------------------------------------------------------------
</TABLE>
FOR A DETAILED LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 15 OF THIS REPORT.
5
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
not guaranteeing the fund's market value or signifying approval of the shares by
national rating agencies, reflect the credit quality of the securities as
described in your fund's prospectus and are subject to change.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX
Looking forward, we will continue to emphasize stability of net asset value,
believing that this conservative approach should position the fund well for the
future.
PERFORMANCE SUMMARY
For the periods ended March 31, 1995, your fund provided a six-month cumulative
total return of +1.98%, and a one-year total return of +1.90%. Cumulative total
return reflects the change in value of an investment over the periods indicated,
assuming reinvestment of dividends and capital gains, if any. It does not
include the maximum 1.5% initial sales charge. Past performance is not
predictive of future results.
During the six-month reporting period, the fund's price per share, as measured
by net asset value, declined 8 cents, from $23.69 on September 30, 1994, to
$23.61 on March 31, 1995. The fund paid income distributions totaling 54 cents
($0.54) per share over the same period. We are pleased to report that due to the
fund's increased income, we were able to raise your monthly distribution from
8.3 cents ($0.083) per share to 8.7 cents ($0.087) per share, effective with the
December 1994 distribution. We again adjusted the dividend to 10 cents ($0.10)
per share, effective with the
6
<PAGE>
================================================================================
February 1995 distribution. Dividends will vary based on portfolio earnings, and
past distributions are not necessarily indicative of future trends.
The fund's distribution rate was 5.01%, based on an annualization of the
currently monthly dividend of 10 cents per share and the maximum offering price
of $23.97 on March 31, 1995. Based on the 1995 maximum federal corporate tax
rate of 35%, the taxable equivalent distribution rate was 6.90%. These
calculations assume that 100% of your fund's dividends qualify for the 70%
corporate dividends-received deduction.
We have always maintained a long-term perspective and encourage shareholders to
do the same. While the fund may experience volatility from time to time, we are
confident that its performance will be satisfactory over the long term. The
table to the right illustrates that if you had invested at the fund's inception,
your total return, based on net asset value, would have been over 65% at the end
of the reporting period.
- --------------------------------------------------------------------------------
FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
Periods ended March 31, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (01/14/87)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NAV Cumulative
Total Return(1) 1.90% 59.47% 65.30%
POP Cumulative
Total Return(1) 0.37% 57.05% 62.83%
NAV Average Annual
Total Return(2) 1.90% 9.78% 6.31%
POP Average Annual
Total Return(2) 0.37% 9.45% 6.11%
Distribution Rate(3) 5.01%
Taxable Equivalent
Distribution Rate(4) 6.90%
30-Day Standardized
Yield(5) 5.12%
</TABLE>
- --------------------------------------------------------------------------------
1. Net asset value (NAV) cumulative total returns show the change in value of an
investment over the periods indicated and do not include the maximum 1.5% sales
charge stated in the prospectus. Public offering price (POP) cumulative total
returns show the change in value of an investment over the periods indicated and
include the maximum 1.5% sales charge. See note below.
2. NAV average annual total returns represent the average annual change in value
of an investment over the specified periods and do not include the maximum 1.5%
sales charge. POP average annual total returns represent the average annual
change in value of an investment over the specified periods and reflect the
current, maximum 1.5% sales charge stated in the prospectus. See note below.
3. Distribution rate is based on an annualization of the fund's current 10 cents
per share monthly dividend and the maximum offering price of $23.97 on March 31,
1995.
4. Taxable equivalent distribution rate assumes the 1995 maximum federal
corporate tax rate of 35%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio during the 30 days ended March 31, 1995.
Note: All total return calculations assume reinvestment of dividends and capital
gains, if any, at net asset value. Your investment return and principal value
will fluctuate with market conditions, and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.
7
<PAGE>
FRANKLIN RISING DIVIDENDS FUND
================================================================================
The Franklin Rising Dividends Fund invests primarily in equity securities of
companies that have paid consistently rising dividends over the past 10 years.
This strategy is based on our belief that companies with consistently rising
dividends should, over time, realize increases in the prices of their shares. We
select portfolio securities based on several criteria. To be eligible for
purchase, stocks must pass "screens," or screening procedures, requiring
consistent and substantial dividend increases, strong balance sheets and
relatively low price/earnings ratios. We seek fundamentally sound companies that
meet our standards and try to acquire them at attractive prices, often when they
are out of favor with investors.
We have recently completed a study comparing the portfolio of the Standard &
Poor's 500 Stock Index(R) with that of our fund on the basis of several
fundamental investment characteristics. We reviewed measures such as current
yield, relative price, debt ratios, and other factors, and found that the fund's
portfolio compared quite favorably with the Standard & Poor's Index. The table
to the right illustrates that our fund's portfolio yielded more than the index,
sold at lower price/earnings and price/book value ratios, and carried less debt
to total capital. These comparisons confirm our conviction that our investment
approach tends to result in the selection of high quality securities that are
attractively priced. Over time, we believe this will prove rewarding for our
shareholders.
- --------------------------------------------------------------------------------
FRANKLIN RISING DIVIDENDS FUND VS.
STANDARD & POOR'S 500 STOCK INDEX(R)
Common Stock Analysis
Quarter Ended December 31, 1994
<TABLE>
<CAPTION>
RISING S&P 500
DIVIDENDS STOCK
FUND INDEX
- --------------------------------------------------------------------------------
<S> <C> <C>
Income Yield 3.4% 2.9%
- --------------------------------------------------------------------------------
Price/Book
Value 3.1 3.7
- --------------------------------------------------------------------------------
Average Market
Capitalization $1.4 billion $2.2 billion
- --------------------------------------------------------------------------------
Price/Earnings 11.3 15.1
- --------------------------------------------------------------------------------
Debt/Total
Capital 27.8% 37.8%
- --------------------------------------------------------------------------------
BETA 0.92 1.00
- --------------------------------------------------------------------------------
</TABLE>
It's also interesting to note how the top 10 companies reflect the fund's
screening requirements. On average, as of March 31, 1995, these companies have
increased their dividends 19 straight years, increased them 507% in the past 10
years, have debt to total capital ratios of only 18%, and sell at a
price/earnings ratio of only 13.1.
8
<PAGE>
================================================================================
Our tobacco and drug stocks have done well over the past few months. For the
quarter ended March 31, 1995, Philip Morris was up 13.5%, while UST, Inc. and
Merck & Co., Inc. showed gains of 14.4% and 11.8%, respectively. Additionally,
operating results among our sizable regional bank and insurance holdings were
very good. We have great confidence that our holdings in these areas will
continue to produce superior dividend increases in the years ahead. While higher
interest rates may hamper financial companies' stock prices, we anticipate that
those with operating advantages over their competitors will generally earn more
when rates are higher.
During the past six months, we eliminated positions in Melville, Washington
Federal Savings & Loan, Alltel, and Cincinnati Financial. While Alltel is a fine
rising dividend company and has performed well, at 17 times its projected
earnings, we thought it prudent to take profits. Should the speculation in
telecommunication stocks yield to pessimism at some point, we may be able to
reclaim this stock at a multiple below its 14.5 midpoint price/earnings ratio.
We also established new positions in American International Group, Arbor Drugs,
Bob Evans
- --------------------------------------------------------------------------------
FRANKLIN RISING DIVIDENDS FUND
Top 10 Stock Holdings on March 31, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
INDUSTRY NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Merck & Co., Inc. 3.12%
Pharmaceuticals
- --------------------------------------------------------------------------------
UST, Inc. 3.05%
Consumer Goods
- --------------------------------------------------------------------------------
Dibrell Brothers, Inc. 3.04%
Consumer Goods
- --------------------------------------------------------------------------------
Philip Morris Co., Inc. 2.99%
Consumer Goods
- --------------------------------------------------------------------------------
TrustCo Bank Corp., NY 2.99%
Banks
- --------------------------------------------------------------------------------
Mercury General Corp. 2.67%
Insurance (Property/Casualty)
- --------------------------------------------------------------------------------
Walgreen Co. 2.60%
Retail
- --------------------------------------------------------------------------------
Schering-Plough Corp. 2.56%
Pharmaceuticals
- --------------------------------------------------------------------------------
Torchmark Corp. 2.55%
Insurance (Life & Health)
- --------------------------------------------------------------------------------
Newell Co. 2.55%
Industrial
- --------------------------------------------------------------------------------
</TABLE>
For a complete list of holdings, please see page 17 of this report.
9
<PAGE>
================================================================================
Farms, General Electric, Rockwell International, Superior Industries, and
Superior Surgical Manufacturing. American International satisfies our criteria,
is financially strong and has a reputation among its competitors for superior
management. General Electric also satisfies our screening criteria, notably
raising its dividends for 18 consecutive years, most recently by 14.3% in
December 1994. At 13 times its projected 1995 earnings, its price is below its
10-year price/earnings average. The company's financial businesses continue to
flourish and the industrial lines are competitive worldwide.
Like General Electric, Rockwell International is globally competitive in its
industrial, electronics, and capital goods lines. Although it is around its
midpoint price/earnings ratio of 10, Rockwell is well below the market
price/earnings ratio of 13.5, having come down 18% from its 1994 high, and has a
growth rate at least equal to that of the market's. Rockwell's recent
acquisition of Reliance Electric is advantageous for the industrial automation
division and, as such, is an optimal use of Rockwell's steady excess cash flow.
Dividend growth and stock repurchases are expected to continue.
Throughout the reporting period, minor additions and reductions were made to the
portfolio to balance existing holdings. We reduced our position in banks to
13.9% by March 31, 1995, from 17.9% on September 30, 1994, and increased
holdings in our industrial sector to 16.7% from 12.2% during the same period.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX
By and large, we intend to adhere to our proven philosophy of investing for the
long term in the best companies we can find within the rising dividend universe.
Overall, the fund's portfolio meets rigorous quality standards and sells well
below standard market price/earnings ratios. We believe such a combination
should prove rewarding to the patient shareholder, and we look forward to
serving you in the future.
10
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The fund's share price, as measured by net asset value, increased significantly
during the reporting period to $15.36 on March 31, 1995, from $14.67 on
September 30, 1994. Shareholders received distributions totaling 16.3 cents
($0.163) per share, including 12.5 cents ($0.125) per share in dividend income
and a special year-end distribution of 3.8 cents ($0.038) per share, distributed
in December 1994.
Based on this dividend income and change in share price, the fund posted a
cumulative total return of +5.89% for the six months ended March 31, 1995. For
the one-year period ended March 31, cumulative total return was +10.21%. Total
return measures the change in value of an investment over the periods indicated,
assuming reinvestment of dividends and capital gains, if any. This calculation
does not include the initial sales charge. Past performance is not predictive of
future results.
We have always maintained a long-term perspective and encourage shareholders to
do the same. While the fund may experience volatility from time to time, we are
confident that its performance will be satisfactory over the long term. The
table to the right illustrates that if you had invested at the fund's inception,
your total return would have been over +87% at the end of the reporting period.
- --------------------------------------------------------------------------------
FRANKLIN RISING DIVIDENDS FUND
Periods ended March 31, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (01/14/87)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Average Annual
Total Return(1) 5.25% 7.67% 7.34%
Cumulative
Total Return(2) 10.21% 51.54% 87.34%
- --------------------------------------------------------------------------------
</TABLE>
1. Average annual total return represents the average annual change in value of
an investment over the specified periods and reflects the current maximum 4.50%
initial sales charge. See note below.
2. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.50% initial sales charge.
See note below.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge. Thus, actual total returns for purchasers of shares during that period
would have been somewhat different than noted above. All total return
calculations assume reinvestment of dividends and capital gains, if any, at net
asset value. Your investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
The historical total return figures shown above pertain only to Class I shares
of the fund. Class II shares, which the fund began offering on May 1, 1995, are
subject to different fees and expenses, which will affect their performance.
Total return figures for Class II shares are not yet available. Please see the
prospectus for more details regarding Class I and Class II shares.
11
<PAGE>
FRANKLIN INVESTMENT GRADE INCOME FUND
================================================================================
The Franklin Investment Grade Income Fund currently is composed primarily of
bonds with short- and intermediate-term effective maturities. The fund seeks to
offer a higher yield than a money market fund, generally with less risk to
principal than a fund composed of long-term securities or in securities that are
below investment grade quality.*
Early in the fund's fiscal year, long-term interest rates rose in response to
fear that the Federal Reserve Board (the Fed) was failing in its attempt to
control an overheating economy. From November 1994 through March 1995, long-term
yields declined for three reasons: 1) the Fed regained credibility with two
sizable increases in the federal funds rate, raising it to 6.00% double the
3.00% rate in effect early in 1994; 2) the Mexican currency crisis discouraged
investment in developing countries and rechannelled investment funds to safer
havens like Japan, Germany and the U.S.; and 3) economic statistics released in
the first two months of 1995 seemed to point toward the possibility of the often
hoped for, but ever elusive, "non-inflationary soft landing."
When the U.S. dollar fell 13.4% and 11.5% against the Japanese yen and the
German mark, respectively, during the first quarter of 1995, investors became
cautious. Apparently, international investors were disappointed by the growing
U.S. trade deficit, the failure of Congress to pass the balanced budget
amendment, and the Mexican bailout attempt. A falling dollar tends to discourage
needed foreign investment in dollar-denominated bonds, unless interest rates
rise enough to compensate for the perceived risk to purchasing power.
Though there was significant market turbulence through the first half of the
reporting period, the fund continued to be well-served by its emphasis on short-
and intermediate-term maturities, which increased its income each time they were
rolled over into other higher-yielding short-term investments. As a result, the
fund was able to raise its monthly dividend from 3.3 cents per share to 3.7
cents per share, effective with the December 1994 distribution. The fund's share
price, as measured by net asset value, was very stable and finished the
reporting period where it began, at $8.82 per share.
*Generally, long-term securities and lower quality securities provide higher
yields. A money fund seeks a stable $1.00 per share net asset value.
12
<PAGE>
================================================================================
We seek to control various sources of potential risk, including interest rate
risk and credit risk, through careful selection of securities and active
management of their maturities. The weighted average quality of the portfolio's
securities was in the AA range of credit quality, as measured by Standard &
Poor's Corporation. These ratings, while not guaranteeing the fund's market
value or signifying approval of the shares by national ratings agencies, reflect
the quality of the bonds as described in the fund's prospectus and are subject
to change. All investments are call-protected for life.
On March 31, 1995, the fund's investments included 40.6% in government and
government-related bonds, 26.3% in straight short- and intermediate-term bonds,
18.1% in "putable" corporate bonds and 15.0% in cash and equivalents.
A "putable" bond is structured so that if interest rates rise, the bond can be
redeemed at par value at an early effective maturity. This feature allows the
proceeds to be reinvested at the then-higher interest rates. Conversely, if
interest rates decline by the security's optional retirement date, we can either
keep the higher yielding bond or sell it at a favorable price. The use of
"putable" bonds is an integral part of our conservative investment strategy
whenever we can purchase them on an attractive basis. During the six-month
reporting period, we were able to almost double the percentage of "putables"
owned, from 9% on September 30, 1994, to 18.1% on March 31, 1995. The fund's
weighted average maturity was 1.6 years based on the optional "put" dates as the
effective maturities, and 6.2 years based on the final stated maturities.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
With the success of the "non-inflationary soft landing" questionable and
currency markets still unhappy with the dollar, we will continue to pursue our
conservative investment posture. Having maintained fund liquidity, we are in a
position to buy more "putable" bonds if they once again become attractive or
begin extending maturities incrementally.
13
<PAGE>
================================================================================
PERFORMANCE SUMMARY
Your fund's share price, as measured by net asset value, finished the reporting
period where it began - at $8.82 per share.
During the six-month period, your fund paid income distributions totaling 25.7
cents ($0.257) per share, including 21.4 cents ($0.214) in monthly dividend
income and a special year-end distribution of 4.3 cents ($0.043) in December
1994. We are pleased to report that due to an increase in the fund's income, we
were able to raise the monthly dividend to 3.7 cents ($0.037) per share from 3.3
cents ($0.033) per share, effective with the December 1994 distribution.
Distributions will vary based on the earnings of the fund's portfolio, and past
distributions are not indicative of future trends.
Based on an annualization of the current monthly dividend of 3.7 cents per share
and the maximum offering price of $9.21 on March 31, 1995, your fund's
distribution rate was 4.82%.
For the periods ended March 31, 1995, your fund posted a six-month cumulative
total return of +2.99%, and a one-year total return of +3.55%. Cumulative total
return reflects the change in value of an investment over the periods indicated,
assuming reinvestment of dividends and capital gains, if any. It does not
include the maximum 4.25% initial sales charge. Past performance is not
predictive of future results.
- --------------------------------------------------------------------------------
FRANKLIN INVESTMENT GRADE INCOME FUND
Period ended March 31, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (01/14/87)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative
Total Return(1) 3.55% 47.23% 61.95%
Average Annual
Total Return(2) -0.87% 7.11% 5.49%
Distribution Rate(3) 4.82%
30-Day Standardized
Yield(4) 5.49%
- --------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge.
See note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and reflects the current, maximum 4.25%
initial sales charge. See note below.
3. Distribution rate is based on an annualization of the fund's current 3.7 cent
per share monthly dividend and the maximum offering price of $9.21 on March 31,
1995.
4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended March 31, 1995.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge. Thus, actual total returns for purchasers of shares during that period
would have been somewhat different than noted above. All total return
calculations assume reinvestment of dividends and capital gains, if any, at net
asset value. Your investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
14
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)ADJUSTABLE RATE PREFERRED STOCKS 18.7%
COMMERCIAL BANKS & BANK HOLDING COMPANIES 3.2%
22,400 Marine Midland Bank, Inc., 6.00% adj. rate pfd., Series A ........................ $ 929,600
---------
ELECTRIC UTILITIES 7.7%
10,000 Arizona Public Service Co., 6.00% adj. rate pfd., Series Q ....................... 760,000
22,500 Niagara Mohawk Power Corp., 8.60% cum. adj. rate pfd., Series C .................. 520,313
46,700 Toledo Edison Co., 8.12% cum. adj. rate pfd., Series A ........................... 969,025
---------
2,249,338
---------
INDUSTRIAL 3.7%
22,275 USX Corp., 8.35% cum. adj. rate pfd. ............................................. 1,099,828
---------
INSURANCE 4.1%
12,000 SunAmerica Corp., 7.30% cum. adj. rate pfd., Series A ............................ 1,203,000
---------
TOTAL ADJUSTABLE RATE PREFERRED STOCKS (COST $6,030,940) ................... 5,481,766
---------
(b)AUCTION RATE PREFERRED STOCKS 31.2%
13(c) Alcoa International Holdings, 4.60%, Series A..................................... 1,303,986
10(c) CNA Financial Corp., 4.68%, Series F.............................................. 1,003,900
13(c) General Electric Capital Corp., 4.549%, Series F.................................. 1,303,942
1,000(d) Morgan (JP), Inc., 4.46%, Series C................................................ 1,001,115
10(c) Sara Lee Corp., 4.515%, Series D.................................................. 1,006,444
10(c) Southern California Gas Co., 4.55%, Series A...................................... 1,003,792
15(c) Transamerica Co., 4.626%, Series A-1.............................................. 1,500,578
10(c) VEPC, 4.63%, Series 92-A.......................................................... 1,003,344
---------
TOTAL AUCTION RATE PREFERRED STOCKS (COST $9,100,000) ...................... 9,127,101
---------
FIXED RATE PREFERRED STOCKS 29.8%
COMMERCIAL BANKS 4.8%
28,000 Bankers Trust (New York), 7.375% flex. rate pfd., Series J ....................... 1,400,854
---------
FINANCIAL 8.2%
14(c) Ford Holdings, Inc., 4.95% flex rate pfd., Series K............................... 1,379,836
10,000 Household Finance Co., 7.25% pfd., Series A ...................................... 1,018,750
---------
2,398,586
---------
INDUSTRIAL 2.9%
28,913 McDermott, Inc., $2.60 cum. S.F., pfd., Series B ................................. 842,091
---------
PHARMACEUTICALS 5.1%
15(c) Rhone-Poulenc Rorer, 4.70% flex rate pfd., Series 1............................... 1,492,784
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
VALUE
SHARES FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)FIXED RATE PREFERRED STOCKS (CONT.)
Utilities 8.8%
15,000 Louisiana Power & Light Co., 7.00% S.F., pfd. .................................... $ 1,554,375
10,000 Rochester Gas & Electric Co., 7.45% S.F., pfd., Series S ......................... 1,033,750
-----------
2,588,125
-----------
TOTAL FIXED RATE PREFERRED STOCKS (COST $8,868,184) ........................ 8,722,440
-----------
TOTAL ADJUSTABLE, AUCTION AND FIXED RATE PREFERRED STOCKS
(COST $23,999,124) ........................................................ 23,331,307
-----------
FACE
AMOUNT
----------
(e)RECEIVABLES FROM REPURCHASE AGREEMENTS 20.2%
$1,185,000 Fuji Securities, Inc., 6.25%, 04/03/95 (Maturity Value $1,200,625)
Collateral: U.S. Treasury Notes, 7.375%, 05/15/96 ............................... 1,200,000
3,488,984 (f)Joint Repurchase Agreement, 6.27%, 04/03/95 (Maturity Value $3,516,170)
Collateral: U.S. Treasury Notes, 5.00% - 9.25%, 08/31/96 - 12/31/99 ............. 3,514,334
1,281,000 Nikko Securities Co. International, Inc., 6.15%, 04/03/95 (Maturity Value
$1,200,615) Collateral: U.S. Treasury Notes, 5.125%, 11/30/98 ................... 1,200,000
-----------
TOTAL RECEIVABLES FROM REPURCHASE AGREEMENTS (COST $5,914,334) ............. 5,914,334
-----------
TOTAL INVESTMENTS (COST $29,913,458) 99.9% ............................ 29,245,641
OTHER ASSETS AND LIABILITIES, NET .1% ................................. 31,244
-----------
NET ASSETS 100.0% ...................................................... $29,276,885
===========
At March 31, 1995, the net unrealized depreciation based on the cost of
investments for income tax purposes of $29,913,458 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was
an excess of value over tax cost .............................................. $ 74,889
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value .............................................. (742,706)
-----------
Net unrealized depreciation .................................................... $ (667,817)
===========
</TABLE>
PORTFOLIO ABBREVIATIONS:
S.F. - Sinking Fund
(a) Dividend rates adjust quarterly in reference to various U.S. Treasury
benchmarks.
(b) Dividend rates adjust in response to periodic auctions, normally on a 49-day
cycle.
(c) 1 share = $100,000 par value
(d) 1 share = $1,000 par value
(e) Face amount for repurchase agreements is for the underlying collateral.
(f) See Note 1(f) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES FRANKLIN RISING DIVIDENDS FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 88.6%
BANKS 13.9%
155,700 Banc One Corp. ................................................................ $ 4,437,450
153,500 CoreStates Financial Corp. .................................................... 4,912,000
215,000 Mercantile Bankshares Corp. ................................................... 4,756,875
197,000 National Commerce Bancorp. .................................................... 4,801,875
16,200 River Forest Bancorp, Inc. .................................................... 534,600
114,000 State Street Boston Corp. ..................................................... 3,633,750
356,000 TrustCo Bank Corp., New York .................................................. 7,387,000
161,100 Wilmington Trust Corp. ........................................................ 3,906,675
-----------
34,370,225
-----------
CONSUMER GOODS 14.2%
59,000 Alberto-Culver Co., Class A ................................................... 1,548,750
51,400 Bob Evans Farms, Inc. ......................................................... 1,072,975
371,000 Dibrell Brothers, Inc. ........................................................ 7,512,750
113,500 Philip Morris Cos., Inc. ...................................................... 7,405,875
65,000 Roto-Rooter, Inc. ............................................................. 1,722,500
368,800 Stride Rite Corp. ............................................................. 4,656,100
180,000 Universal Corp. ............................................................... 3,757,500
238,000 UST, Inc. ..................................................................... 7,556,500
-----------
35,232,950
-----------
DRUGS/HEALTH CARE 9.0%
36,500 Bristol-Myers Squibb Co. ...................................................... 2,299,500
181,000 Merck & Co., Inc. ............................................................. 7,715,125
67,000 Pfizer, Inc. .................................................................. 5,745,250
85,000 Schering-Plough Corp. ......................................................... 6,321,875
-----------
22,081,750
-----------
ENERGY 1.9%
40,000 Royal Dutch Petroleum Co., New York Shares .................................... 4,800,000
-----------
FINANCIAL SERVICES 2.2%
68,000 Federal National Mortgage Association ......................................... 5,533,500
-----------
INDUSTRIAL 16.7%
3,000 Diebold, Inc. ................................................................. 107,250
58,500 General Electric Co. .......................................................... 3,166,313
104,000 Genuine Parts Co. ............................................................. 4,147,000
303,200 Hanson, Plc., ADR ............................................................. 5,722,900
117,000 Kimball International, Inc., Class B .......................................... 3,012,750
62,400 Loctite Corp. ................................................................. 3,003,000
183,000 Masco Corp. ................................................................... 5,055,375
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
VALUE
SHARES FRANKLIN RISING DIVIDENDS FUND (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
INDUSTRIAL (CONT.)
70,000 Monsanto Co. .................................................................. $ 5,617,500
122,450 Myers Industries, Inc. ........................................................ 1,729,606
247,000 Newell Co. .................................................................... 6,298,500
48,000 Rockwell International Corp. .................................................. 1,872,000
47,000 Superior Industries International, Inc. ....................................... 1,198,500
38,100 Superior Surgical Manufacturing Co., Inc. ..................................... 452,438
-----------
41,383,132
-----------
INSURANCE - LIFE & HEALTH 2.6%
152,000 Torchmark Corp. ............................................................... 6,308,000
-----------
INSURANCE - PROPERTY CASUALTY 13.2%
163,100 Allied Group, Inc. ............................................................ 4,607,575
21,200 American International Group, Inc. ............................................ 2,210,100
76,000 Chubb Corp. ................................................................... 6,004,000
230,000 Mercury General Corp. ......................................................... 6,612,500
205,000 RLI Corp. ..................................................................... 4,791,875
71,000 SAFECO Corp. .................................................................. 3,887,250
156,900 Selective Insurance Group, Inc. ............................................... 4,510,875
-----------
32,624,175
-----------
PRINTING/PUBLISHING 1.7%
28,300 Dun & Bradstreet Corp. ........................................................ 1,489,288
57,800 Reader's Digest Association, Inc., Class A .................................... 2,781,625
-----------
4,270,913
-----------
RETAIL 9.1%
17,100 Arbor Drugs, Inc. ............................................................. 406,125
343,500 Family Dollar Stores, Inc. .................................................... 4,379,625
226,000 Rite Aid Corp. ................................................................ 5,537,000
245,000 The Limited, Inc. ............................................................. 5,665,625
133,400 Walgreen Co. .................................................................. 6,419,875
-----------
22,408,250
-----------
TRANSPORTATION 4.1%
314,500 Arnold Industries, Inc. ....................................................... 5,582,375
68,000 Norfolk Southern Corp. ........................................................ 4,547,500
-----------
10,129,875
-----------
TOTAL COMMON STOCKS (COST $200,831,565) ................................. 219,142,770
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN RISING DIVIDENDS FUND (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(e,f)RECEIVABLES FROM REPURCHASE AGREEMENTS 11.4%
$27,959,195 Joint Repurchase Agreement, 6.27%, 04/03/95 (Maturity Value $28,176,257)
(COST $28,161,543)
Collateral: U.S. Treasury Notes, 5.00% - 9.25%, 08/31/96 - 12/31/99 .......... $ 28,161,543
------------
TOTAL INVESTMENTS (COST $228,993,108) 100.0% ....................... 247,304,313
OTHER ASSETS AND LIABILITIES, NET ................................... 66,735
------------
NET ASSETS 100.0% .................................................. $247,371,048
============
At March 31, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $228,993,108 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost ....................................... $ 27,400,813
Aggregate gross unrealized depreciation for all investments in which there
was an excess of tax cost over value ....................................... (9,089,608)
------------
Net unrealized appreciation ................................................. $ 18,311,205
============
</TABLE>
(e) Face amount for repurchase agreements is for the underlying collateral.
(f) See Note 1(f) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INVESTMENT GRADE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES 9.0%..........................................................
$ 500,000 U.S. Treasury Notes, 7.375%, 05/15/96 .................................................... $ 504,063
1,000,000 U.S. Treasury Notes, 7.875%, 06/30/96 .................................................... 1,015,000
1,000,000 U.S. Treasury Notes, 7.00%, 09/30/96 ..................................................... 1,004,687
------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $2,635,858) ................................. 2,523,750
------------
FOREIGN GOVERNMENT SECURITIES 3.6%
1,000,000 Province of Manitoba, Canada, notes (putable* 07/17/96), 7.75%, 07/17/16
(COST $1,059,510) ....................................................................... 1,013,620
------------
CORPORATE BONDS 44.4%
AUTOMOTIVE 4.7%
1,250,000 General Motors Corp., senior notes (putable* 03/01/98), 8.80%, 03/01/21 .................. 1,334,098
------------
CONSUMER GOODS 3.4%
1,000,000 Heinz (H.J.) Co., notes, 5.50%, 09/15/97 ................................................. 964,475
------------
ELECTRIC UTILITIES 5.2%
1,500,000 Southern California Edison Co., first & ref. mortgage bonds, 6.125%, 07/15/97 ............ 1,465,481
------------
FINANCIAL 14.8%
1,300,000 Associates Corp. of North America, deb., Series B, 7.95%, 02/15/10 ....................... 1,324,807
1,500,000 GE Capital Corp., medium term notes (step up to 8.125% or putable* 04/01/98), 5.80%,
04/01/08 ................................................................................ 1,477,476
1,000,000 International Lease Financial Co., notes, 6.375%, 11/01/96 ............................... 988,911
400,000 Transamerica Financial Corp., notes, 5.85%, 07/15/96 ..................................... 394,100
------------
4,185,294
------------
INDUSTRIAL 3.5%
1,000,000 WMX Technologies, Inc., notes (step up to 8.00% or putable* 03/01/97), 6.22%, 04/30/04 993,366
------------
SEMICONDUCTOR MANUFACTURERS 2.9%
750,000 Motorola, Inc., deb. (putable* 08/15/01), 8.40%, 08/15/31 ................................ 811,733
------------
TELECOMMUNICATIONS EQUIPMENT 1.8%
500,000 Northern Telecommunications, Ltd., notes, 8.25%, 06/13/96 ................................ 507,618
------------
TELEPHONE UTILITIES 8.1%
500,000 Chesapeake Potomac Telephone of Maryland, deb. (putable* 10/15/96), 8.00%, 10/15/29 519,273
1,800,000 GTE California, first mortgage bonds, 6.25%, 01/15/98 .................................... 1,757,425
------------
2,276,698
------------
TOTAL CORPORATE BONDS (COST $12,653,921) ........................................... 12,538,763
------------
TOTAL LONG TERM INVESTMENTS (COST $16,349,289) ..................................... 16,076,133
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS,
MARCH 31, 1995 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INVESTMENT GRADE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS
U.S. GOVERNMENT SECURITIES 28.0%
$3,000,000 U.S. Treasury Notes, 3.875%, 11/31/95 .................................................... $ 2,960,625
4,000,000 U.S. Treasury Notes, 4.625%, 02/15/96 .................................................... 3,937,500
1,000,000 U.S. Treasury Notes, 7.75%, 03/31/96 ..................................................... 1,011,250
-----------
TOTAL U.S. GOVERNMENT SECURITIES (COST $8,091,760) ................................. 7,909,375
-----------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $24,441,049) .................. 23,985,508
-----------
(e,f)RECEIVABLES FROM REPURCHASE AGREEMENTS 14.2%
3,983,306 Joint Repurchase Agreement, 6.27%, 04/03/95 (Maturity Value $4,014,316)
(COST $4,012,220)
Collateral: U.S. Treasury Notes, 5.00% - 9.25%, 08/31/96 - 12/31/99 ...................... 4,012,220
-----------
TOTAL INVESTMENTS (COST $28,453,269) 99.2% ...................................... 27,997,728
OTHER ASSETS AND LIABILITIES, NET .8% ........................................... 229,363
-----------
NET ASSETS 100.0% ............................................................... $28,227,091
===========
At March 31, 1995, the net unrealized depreciation based on the cost of investments
for income tax purposes of $28,453,269 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ......................................................... $ 167,728
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ......................................................... (623,269)
-----------
Net unrealized depreciation ............................................................ $ (455,541)
===========
</TABLE>
* Holder may choose either to redeem at par on put date or, if more
advantageous, to hold to final stated maturity.
(e) Face amount for repurchase agreements is for the underlying collateral.
(f) See Note 1(f) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
CORPORATE FRANKLIN INVESTMENT
QUALIFIED RISING DIVIDENDS GRADE INCOME
DIVIDEND FUND FUND FUND
------------- ---------------- ------------
<S> <C> <C> <C>
Assets:
Investments in securities:
At identified cost ........................................... $23,999,124 $200,831,565 $24,441,049
=========== ============ ===========
At value ..................................................... 23,331,307 219,142,770 23,985,508
Receivables from repurchase agreements, at value and cost ..... 5,914,334 28,161,543 4,012,220
Receivables:
Dividends and interest ....................................... 64,873 755,620 364,819
Capital shares sold .......................................... 24,847 132,764 41,464
Investment securities sold ................................... -- 6,690 --
----------- ------------ -----------
Total assets ............................................. 29,335,361 248,199,387 28,404,011
----------- ------------ -----------
Liabilities:
Payables:
Investment securities purchased .............................. -- 107,430 --
Capital shares repurchased ................................... 30,000 310,946 150,921
Management fees .............................................. 12,113 153,534 11,917
Distribution fees ............................................ 9,484 221,609 12,898
Shareholder servicing costs .................................. -- 13,811 786
Accrued expenses and other liabilities ........................ 6,879 21,009 398
----------- ------------ -----------
Total liabilities ........................................ 58,476 828,339 176,920
----------- ------------ -----------
Net assets, at value ........................................... $ 29,276,885 $247,371,048 $28,227,091
=========== ============ ===========
Net assets consist of:
Undistributed net investment income ........................... $ 282,333 $ 465,995 $ 158,364
Unrealized appreciation (depreciation) on investments ......... (667,817) 18,311,205 (455,541)
Accumulated net realized loss ................................. (10,496,442) (9,506,495) (1,402,821)
Capital shares ................................................ 12,402 161,002 32,008
Additional paid-in capital .................................... 40,146,409 237,939,341 29,895,081
----------- ------------ -----------
Net assets, at value ........................................... $ 29,276,885 $247,371,048 $28,227,091
=========== ============ ===========
Capital shares outstanding ..................................... 1,240,160 16,100,197 3,200,803
=========== ============ ===========
Net asset value per share ...................................... $23.61 $15.36 $8.82
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
CORPORATE FRANKLIN INVESTMENT
QUALIFIED RISING DIVIDENDS GRADE INCOME
DIVIDEND FUND FUND FUND
------------- ---------------- ------------
<S> <C> <C> <C>
Investment income:
Interest ........................................................ $ 135,572 $ 726,633 $ 876,834
Dividends ....................................................... 720,529 3,578,345 --
--------- ----------- ---------
Total Income ............................................... 856,101 4,304,978 876,834
--------- ----------- ---------
Expenses:
Management fees (Note 5) ........................................ 71,796 921,324 70,911
Distribution fees (Note 5) ...................................... 30,945 597,540 33,006
Accounting fees (Note 5) ........................................ 20,000 20,000 20,000
Shareholder servicing costs (Note 5) ............................ 1,293 99,681 5,562
Registration and filing fees .................................... 8,429 43,100 6,835
Professional fees ............................................... 5,241 13,099 4,595
Reports to shareholders ......................................... 3,755 62,401 8,813
Trustees' fees and expenses ..................................... 1,656 12,824 1,587
Custodian fees .................................................. 1,104 10,762 1,369
Other ........................................................... 2,268 7,465 2,530
--------- ----------- ---------
Total expenses ............................................. 146,487 1,788,196 155,208
--------- ----------- ---------
Net investment income ..................................... 709,614 2,516,782 721,626
--------- ----------- ---------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) ........................................ (85,638) 1,219,021 (552,969)
Net unrealized appreciation (depreciation) ...................... (65,702) 9,974,444 660,247
--------- ----------- ---------
Net realized and unrealized gain (loss) on investments ..... (151,340) 11,193,465 107,278
--------- ----------- ---------
Net increase in net assets from operations ....................... $ 558,274 $13,710,247 $ 828,904
========= =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
AND THE YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
FRANKLIN CORPORATE FRANKLIN RISING FRANKLIN INVESTMENT GRADE
QUALIFIED DIVIDEND FUND DIVIDENDS FUND INCOME FUND
---------------------------------- ---------------------------------- ----------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
MARCH 31, 1995 SEPTEMBER 30, 1994 MARCH 31, 1995 SEPTEMBER 30, 1994 MARCH 31, 1995 SEPTEMBER 30, 1994
-------------- ------------------ -------------- ------------------ -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease)
in net assets:
Operations:
Net investment
income............... $ 709,614 $ 1,379,139 $ 2,516,782 $ 5,501,672 $ 721,626 $ 1,530,567
Net realized gain
(loss) from security
transactions ........ (85,638) (328,483) 1,219,021 (6,786,530) (552,969) 44,247
Net unrealized
appreciation
(depreciation) on
investments ......... (65,702) (815,985) 9,974,444 (10,342,790) 660,247 (1,862,578)
----------- ----------- ------------ ------------ ----------- -----------
Net increase
(decrease) in
net assets re-
sulting from
operations ....... 558,274 234,671 13,710,247 (11,627,648) 828,904 (287,764)
Distributions to share-
holders from un-
distributed net
investment income .... (658,581) (1,296,853) (2,714,829) (4,837,881) (829,311) (1,374,547)
Decrease in net
assets from capital
share transactions
(Note 2) ............. (2,413,174) (996,529) (25,085,511) (78,781,141) (1,325,843) (4,753,942)
----------- ----------- ------------ ------------ ----------- -----------
Net decrease in
net assets ....... (2,513,481) (2,058,711) (14,090,093) (95,246,670) (1,326,250) (6,416,253)
Net assets:
Beginning of period 31,790,366 33,849,077 261,461,141 356,707,811 29,553,341 35,969,594
----------- ----------- ------------ ------------ ----------- -----------
End of period .......... $29,276,885 $31,790,366 $247,371,048 $261,461,141 $28,227,091 $29,553,341
=========== =========== ============ ============ =========== ===========
Undistributed net invest-
ment income included
in net assets:
Beginning of period $ 231,300 $ 149,014 $ 664,042 $ 251 $ 266,049 $ 110,029
=========== =========== ============ ============ =========== ===========
End of period ......... $ 282,333 $ 231,300 $ 465,995 $ 664,042 $ 158,364 $ 266,049
=========== =========== ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Managed Trust (the Trust) is an open-end, diversified management
investment company (mutual fund), registered under the Investment Company Act of
1940 as amended. The Trust's shares are offered in three different Series
(hereinafter Funds), each of which represents a separate fund. The Trust is
required to account for the assets of each Fund separately and to allocate
general expenses of the Trust to each Fund based upon the net assets of each
Fund.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. SECURITY VALUATION: Portfolio securities listed on a securities exchange or
on the NASDAQ National Market System for which market quotations are readily
available are valued at the last quoted sale price of the day or, if there is no
such reported sale, within the range of the most recent quoted bid and ask
prices. Other securities for which market quotations are readily available are
valued at current market values, obtained from pricing services, which are based
on a variety of factors, including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific securities. Portfolio securities which are
traded both in the over-the-counter market and on a securities exchange are
valued according to the broadest and most representative market as determined by
the Manager. Other securities for which market quotations are not available, if
any, are valued in accordance with procedures established by the Board of
Trustees.
The value of auction rate preferred stock is determined based upon quotations
readily available in the marketplace. If there are no readily available
quotations, the value will be based upon the values of comparable traded
securities. When market quotations are not readily available for securities held
by the Funds, or for comparable securities, then such securities will be valued
at par value plus an accrual of the dividend to be received on the next dividend
payment date, as approved by the Board of Trustees.
b. INCOME TAXES: The Trust intends to continue to qualify for the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
to make the requisite distributions to its shareholders which will be sufficient
to relieve it from income and excise taxes. Therefore, no income tax provision
is required. Each Fund is treated as a separate entity in the determination of
compliance with the Internal Revenue Code.
c. SECURITY TRANSACTIONS: Security transactions are accounted for on the date
the securities are purchased or sold (trade date). Realized gains and losses on
security transactions are determined on the basis of specific identification for
both financial statement and income tax purposes.
d. INVESTMENT INCOME, Expenses and Distributions: Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Bond discount and premium are
amortized as required by the Internal Revenue Code.
e. EXPENSE ALLOCATION: Common expenses incurred by the Trust are allocated among
the Funds based on the ratio of net assets of each Fund to the combined net
assets. In all other respects, expenses are charged to each Fund as incurred on
a specific identification basis.
f. REPURCHASE AGREEMENTS: The Trust may enter into a Joint Repurchase Agreement
whereby its uninvested cash balance is deposited into a joint cash account to be
used to invest in one or more repurchase agreements with government securities
dealers recognized by the Federal Reserve Board and/or member banks of the
Federal Reserve System. The value and face amount of the Joint Repurchase
Agreement are allocated to the Trust based on its pro rata interest.
25
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
1. SIGNIFICANT ACCOUNTING POLICIES (CONT.)
f. REPURCHASE AGREEMENTS: (CONT.)
In a repurchase agreement, the Trust purchases a U.S. Government security from a
dealer or bank subject to an agreement to resell it at a mutually agreed upon
price and date. Such a transaction is accounted for as a loan by the Trust to
the seller, collateralized by the underlying security. The transaction requires
the initial collateralization of the seller's obligation by U.S. Government
securities with market value, including accrued interest, of at least 102% of
the dollar amount invested by the Trust, with the value of the underlying
security marked to market daily to maintain coverage of at least 100%. The
collateral is delivered to the Trust's custodian and held until resold to the
dealer or bank. At March 31, 1995, all outstanding repurchase agreements held by
the Trust had been entered into on that date.
2. TRUST SHARES
At March 31, 1995, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in each of the Funds' shares for
the six months ended March 31, 1995, and the year ended September 30, 1994 are
as follows:
<TABLE>
<CAPTION>
FRANKLIN CORPORATE FRANKLIN RISING FRANKLIN INVESTMENT
QUALIFIED DIVIDEND FUND DIVIDENDS FUND GRADE INCOME FUND
----------------------- -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Six months ended March 31, 1995
Shares sold........................... 261,384 $ 6,140,813 488,731 $ 7,133,063 174,952 $ 1,529,549
Shares issued in reinvestment of
distributions........................ 24,318 571,260 145,954 2,107,180 60,016 522,754
Shares redeemed....................... (351,482) (8,273,729) (1,784,735) (25,986,305) (470,063) (4,114,625)
Changes from exercise of exchange
privilege:
Shares sold......................... 17,979 422,420 477,890 6,975,988 304,780 2,663,624
Shares redeemed..................... (54,056) (1,273,938) (1,054,166) (15,315,437) (220,062) (1,927,145)
-------- ------------ ---------- ------------ ---------- ------------
Net decrease.......................... (101,857) $ (2,413,174) (1,726,326) $(25,085,511) (150,377) $ (1,325,843)
======== ============ ========== ============ ========== ============
Year ended September 30, 1994
Shares sold........................... 642,504 $ 15,490,848 2,324,785 $ 34,973,066 573,667 $ 5,191,694
Shares issued in reinvestment of
distributions........................ 46,825 1,128,951 234,159 3,491,298 92,093 831,361
Shares redeemed....................... (588,984) (14,223,026) (4,407,643) (65,658,112) (1,125,867) (10,294,292)
Changes from exercise of exchange
privilege:
Shares sold......................... 33,305 801,733 1,261,176 19,012,227 583,017 5,280,721
Shares redeemed..................... (174,643) (4,195,035) (4,707,327) (70,599,620) (635,548) (5,763,426)
-------- ------------ ---------- ------------ ---------- ------------
Net decrease.......................... (40,993) $ (996,529) (5,294,850) $(78,781,141) (512,638) $ (4,753,942)
======== ============ ========== ============ ========== ============
</TABLE>
26
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At September 30, 1994 for tax purposes, the Funds had accumulated net capital
loss carryovers as follows:
<TABLE>
<CAPTION>
FRANKLIN CORPORATE FRANKLIN RISING FRANKLIN INVESTMENT
QUALIFIED DIVIDEND FUND DIVIDENDS FUND GRADE INCOME FUND
----------------------- --------------- -------------------
<S> <C> <C> <C>
Capital loss carryovers
Expiring in: 1995...................................... $ 2,056,972 -- $178,611
1996...................................... 5,376,536 -- 124,885
1997...................................... 1,251,202 -- 274,652
1998...................................... 794,958 $ 1,576,911 139,900
1999...................................... 226,936 -- 131,804
2000...................................... 375,717 -- --
2001...................................... -- 2,343,396 --
2002...................................... 328,483 6,805,209 --
----------- ----------- --------
$10,410,804 $10,725,516 $849,852
=========== =========== ========
</TABLE>
For tax purposes, the aggregate cost of securities and unrealized appreciation
(depreciation) of the Trust are the same as for financial statement purposes at
March 31, 1995.
4. PURCHASES AND SALES OF SECURITIES
<TABLE>
<CAPTION>
FRANKLIN CORPORATE FRANKLIN RISING FRANKLIN INVESTMENT
QUALIFIED DIVIDEND FUND DIVIDENDS FUND GRADE INCOME FUND
----------------------- --------------- -------------------
<S> <C> <C> <C>
Aggregate purchases and sales of securities (excluding
purchases and sales of short-term securities) for the
six months ended March 31, 1995, were as follows:
Purchases............................................ $5,515,000 $15,302,316 $3,716,000
========== =========== ==========
Sales................................................ $5,677,387 $40,134,864 $6,903,906
========== =========== ==========
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., under the terms of a management agreement, provides
investment advice, administrative services, office space and facilities to each
Fund, and receives fees computed monthly based on the net assets of the Franklin
Corporate Qualified Dividend Fund and the Franklin Investment Grade Income Fund
at an annualized rate of 0.50% of the Funds' first $500 million in average daily
net assets, 0.45% on the next $500 million, and 0.40% on net assets in excess of
$1 billion; and receives fees computed monthly based on the net assets of the
Franklin Rising Dividends Fund at an annualized rate of 0.75% of the Fund's
first $500 million in average daily net assets, 0.625% on the next $500 million,
and 0.50% on net assets in excess of $1 billion. Fees incurred by the Funds
aggregated $1,064,031 for the six months ended March 31, 1995. Pursuant to the
terms of the Management Agreement, each of the Funds also pays accounting fees
of $40,000 per year to Franklin Advisers, Inc. for the provision of certain
accounting, bookkeeping and recordkeeping functions for the Funds. The terms of
the management agreement provide that aggregate annual expenses of the Funds be
limited to the extent necessary to comply with the limitations set forth in the
laws, regulations and administrative interpretations of the states in which the
Funds' shares are registered. For the six months ended March 31, 1995, the
Funds' expenses did not exceed these limitations.
27
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
In its capacity as underwriter for the shares of the Trust, Franklin/Templeton
Distributors, Inc. received commissions on sales of the Funds' shares for the
six months ended March 31, 1995 totalling $272,799, of which $249,709 was paid
to other dealers. Commissions are deducted from the gross proceeds received from
the sale of the shares of the Trust, and as such are not expenses of the Funds.
Under the terms of a Distribution Plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940, the Franklin Rising Dividends Fund will reimburse
Franklin/Templeton Distributors, Inc., in an amount up to a maximum of 0.50% per
annum of the Fund's average daily net assets, while Franklin Corporate Qualified
Dividend Fund and Franklin Investment Grade Income Fund will reimburse up to a
maximum of 0.25% per annum of the Funds' average daily net assets for costs
incurred in the promotion, offering and marketing of the Funds' shares. Fees
incurred by the Funds under the agreement aggregated $661,491 for the six months
ended March 31, 1995.
Under the terms of a shareholder servicing agreement with Franklin/Templeton
Investor Services, Inc., the Trust pays costs on a per shareholder account
basis. Shareholder servicing costs incurred by the Funds for the six months
ended March 31, 1995 aggregated $106,536, of which $89,382 was paid to
Franklin/Templeton Investor Services, Inc.
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin/Templeton Distributors, Inc., Franklin Advisers, Inc. and
Franklin/Templeton Investor Services, Inc., all wholly owned subsidiaries of
Franklin Resources, Inc.
6. SUBSEQUENT EVENTS
Franklin Rising Dividends Fund will be offering an additional class of shares
effective May 1, 1995.
7. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the year
by fund are as follows:
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE
------------------------------------------------------------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS NET ASSET
YEAR VALUE AT NET & UNREALIZED TOTAL FROM FROM NET VALUE
ENDED BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT AT END TOTAL
SEPT. 30 OF YEAR INCOME ON SECURITIES OPERATIONS INCOME OF YEAR RETURN+
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
1990(1) $20.65 $1.77 $(1.566) $ .204 $(1.824) $19.03 1.05%
1991(1) 19.03 1.73 2.540 4.270 (1.670) 21.63 23.25
1992(1) 21.63 1.37 2.144 3.514 (1.394) 23.75 16.57
1993(2) 23.75 .73 .777 1.507 (.787) 24.47 6.44
1994 24.47 1.02 (.844) .176 (.956) 23.69 .72
1995(3) 23.69 0.60 (.140) .460 (.540) 23.61 1.98
FRANKLIN RISNG DIVIDENDS FUND
1990(1) 11.58 .33 (.310) .020 (.390) 11.21 .26
1991(1) 11.21 .28 3.720 4.000 (.300) 14.91 35.95
1992(1) 14.91 .24 1.290 1.530 (.260) 16.18 10.38
1993(2) 16.18 .19 (.745) (.555) (.195) 15.43 (3.43)
1994 15.43 .28 (.800) (.520) (.240) 14.67 (3.38)
1995(3) 14.67 .15 .703 .853 (.163) 15.36 5.89
</TABLE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
YEAR AT END OF EXPENSES INCOME TO PORTFOLIO
ENDED YEAR TO AVERAGE AVERAGE TURNOVER
SEPT. 30 (IN 000'S) NET ASSETS NET ASSETS RATE
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
1990(1) $17,498 1.33% 8.84% 1.55%
1991(1) 22,242 1.24 8.09 --
1992(1) 29,444 1.10 5.97 29.01
1993(2) 33,849 1.06* 4.09* 27.46
1994 31,790 1.00 4.19 32.17
1995(3) 29,277 1.02* 4.94* 23.27
FRANKLIN RISING DIVIDENDS FUND
1990(1) 39,907 1.60 2.99 28.87
1991(1) 71,380 1.53 2.16 16.83
1992(1) 197,804 1.46 1.67 12.73
1993(2) 356,708 1.40* 1.73* 11.48
1994 261,461 1.43 1.81 25.75
1995(3) 247,371 1.46* 2.05* 6.95
</TABLE>
28
<PAGE>
FRANKLIN MANAGED TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
7. FINANCIAL HIGHLIGHTS (CONT.)
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE
------------------------------------------------------------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS NET ASSET
YEAR VALUE AT NET & UNREALIZED TOTAL FROM FROM NET VALUE
ENDED BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT AT END TOTAL
SEPT. 30 OF YEAR INCOME ON SECURITIES OPERATIONS INCOME OF YEAR RETURN+
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FRANKLIN INVESTMENT GRADE INCOME FUND
1990(1) $8.58 $.74 $(.174) $ .566 $(.746) $8.40 7.01%
1991(1) 8.40 .69 .635 1.325 (.695) 9.03 16.57
1992(1) 9.03 .62 (.086) .534 (.634) 8.93 6.16
19932 8.93 .38 .402 .782 (.402) 9.31 8.94
1994 9.31 .45 (.544) (.094) (.396) 8.82 (1.02)
1995(3) 8.82 .23 .027 .257 (.257) 8.82 2.99
</TABLE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
YEAR AT END OF EXPENSES INCOME TO PORTFOLIO
ENDED YEAR TO AVERAGE AVERAGE TURNOVER
SEPT. 30 (IN 000'S) NET ASSETS NET ASSETS RATE
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
FRANKLIN INVESTMENT GRADE INCOME FUND
1990(1) $12,289 1.43% 8.84% 11.37%
1991(1) 21,773 1.26 8.36 28.31
1992(1) 29,367 1.08 7.02 27.28
19932 35,970 1.09* 5.61* 53.19
1994 29,553 1.05 4.91 10.57
1995(3) 28,227 1.09* 5.09* 14.75
</TABLE>
+ Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum initial sales
charge, and assumes reinvestment of dividends and of capital gains, if any, at
net asset value.
(1) For the year ended December 31.
(2) For the nine months ended September 30, 1993.
(3) For the six months ended March 31, 1995.
* Annualized
29
<PAGE>
Franklin Managed Trust
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) of REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in pie format the fund's securities breakdown by quality as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Portfolio Breakdown on 3/31/95
<S> <C>
AAA 33.2%
AA 3.4%
A 35.9%
BBB 24.2%
BB 3.3%
</TABLE>
GRAPHIC MATERIAL (2)
This chart shows in pie format the fund's securities breakdown by quality as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Portfolio Breakdown on 3/31/95
<S> <C>
Pharmaceuticals 8.9%
Transportation 4.1%
Insurance:Other 2.6%
Print & Publishing 1.7%
Merchandising Apparel 9.1%
Cash & Equivalents 11.4%
Industrial Companies 16.7%
Insurance: Property/Casualty 13.2%
Utilities:Energy 1.9%
Government Sponsored Corporations 2.2%
Consumer Goods 14.2%
Banks 13.9%
</TABLE>
GRAPHIC MATERIAL (3)
This chart shows in pie format the fund's securities breakdown by quality as
a percentage of total net assets.
<TABLE>
<CAPTION>
Portfolio Breakdown on 3/31/95
<S> <C>
AAA 56.2%
AA 25.5%
A 13.6%
BBB 4.7%
</TABLE>
